🔗 Share this article

How do you reckon our system of government works? Perhaps similar to this. Citizens choose MPs. They debate and pass bills. Should a majority is secured, the bills become law. Legislation are enforced by the courts. That's it. However, that was how it used to work. Not anymore.

The Emergence of Offshore Tribunals

In the modern era, international firms, and the oligarchs behind them, have the power to sue elected administrations for the policies they pass, at secret arbitration panels composed of commercial attorneys. The cases are held in secret. Differing from national judiciaries, these tribunals grant no opportunity to appeal or judicial review. The general public are barred from bringing a case to them, just as our government, or even enterprises based in this country. They are open solely for businesses operating from foreign soil.

When a secret court determines that a law or policy may compromise the corporation’s expected profits, it has the power to grant financial penalties of hundreds of millions, running into billions.

These awards constitute not real financial harm but money the arbitrators conclude the company could potentially have made. The government could be forced to rescind the measure. It will be deterred from enacting future policies along the same lines, worried about facing litigation.

A Process Growing Exponentially

Historically high figures of legal actions are being initiated, as corporations learn from each other, and hedge funds finance suits in return for a portion of the takings. The outcome? National sovereignty and democratic governance are becoming unaffordable.

The system is known as “investor-state dispute settlement” (ISDS). The reason it can trump national legislation and the decisions enacted by parliaments is that this clause has been inserted – absent public approval, and frequently under conditions of profound opacity – inside international trade agreements.

A Real-World Example: The UK Coal Mine

Twelve months ago, a conservation group won a great victory at the High Court. The presiding officer ruled that plans to dig the first new deep coal mine in the UK for 30 years, at Whitehaven in Cumbria, were found to be illegally sanctioned by the Conservative government, which had accepted the bizarre claim that the mine would have no impact on national carbon targets. The new government subsequently revoked the consent the former government had issued. Currently, this legal outcome faces being overturned by an foreign court reporting to no one but the corporations petitioning it.

During August, a company whose final controllers are based in the Cayman Islands lodged a claim versus the UK government. The previous week a arbitration panel in the United States was set up to hear it.

This firm is litigating against the UK for the profits it could have earned if the mine had received permission to go ahead. Citizens have no idea how much this could amount to. Who is representing it in opposition to the state? An elected representative, and ex-law officer in the outgoing administration, that great patriot Geoffrey Cox. The administration makes a decision, the domestic court supports it, then a international entity challenges it through an undemocratic offshore tribunal, and a member of our parliament works for its behalf.

An Oligarch's Challenge

Concurrently that the tribunal on the mining lawsuit was convened, we learned from a government response that the UK is subject to further litigation under ISDS by a Russian billionaire, an oligarch. Details are little of the case to date, but it seems likely that he may employ the arbitration process to fight the penalties the UK levied against him after the Russian aggression. He has filed a claim against Luxembourg for this reason, seeking sixteen billion dollars: an amount representing half government’s annual revenue. Included in the counsel acting for him in that case? Cherie Blair, married to the ex-UK leader.

Legal experts believe that the EU’s delay in utilising seized state funds as guarantee for its loan to Ukraine stems from apprehension in Brussels that it could be subject to litigation in the offshore corporate courts, under a trade agreement. This unprecedented, secretive influence over democratic administrations could be blocking the money Ukraine critically depends on.

False Assurances and Mounting Costs

The public was told that such things could not occur. Previously, a senior politician, promoting the most significant and hazardous of all such treaties, stated: “We’ve signed trade agreement after trade deal and we have never seen a case in the past.” An expert on this matter described campaigners of “scaremongering … in reality, ISDS has little impact on the UK much”. The prevailing narrative appeared to be that only poorer nations should be concerned by such legal actions. Predictions that “when companies grasp the authority bestowed upon them, they will shift their focus from the weak nations to the developed economies” were greeted by general mockery.

That threat has now materialised. In the current period, energy and mining firms have initiated a historic level of cases against nations across the economic spectrum, opposing – similar to the Whitehaven project – government attempts to stop climate breakdown. Companies have thus far won vast sums by using ISDS, of which oil majors have been awarded eighty-four billion dollars. That equates to the combined GDP